Q3 17 diluted earnings per share (“EPS”) was $0.84, reflecting an
unfavorable impact of approximately $0.02 from the impact of lost
sales associated with the hurricanes, versus $0.78 in Q3 16.
Excluding severance-related reorganization charges, non-GAAP EPS
was $0.79 in Q3 16 (see Note 1 in Exhibit 1). See Exhibit 1 for a
reconciliation of GAAP to non-GAAP EPS.

-

Cash returned to stockholders totaled approximately $95 million,
comprising $61 million in stock repurchases and $34 million in
dividends.

Laura Alber, President and Chief Executive Officer, commented: “Our
third quarter results demonstrate the effectiveness of our strategic
priorities to deliver value, quality and excellent customer service.
During the quarter, strong execution against our product and digital
initiatives drove new customer acquisition and top-line expansion in a
competitive and dynamic retail environment. Importantly, our demand
during the quarter exceeded or was at least equal to net revenues across
all of our brands – most notably in Pottery Barn and PBteen – which is a
strong indication of the health of our business. Additionally, our
investments in digital innovation and cross-brand services, as well as
continued optimization of our supply chain, position us to further
differentiate our business and to deliver long-term profitable growth.”

Alber continued, “All of our initiatives are underpinned by our vision
to create a high-touch customer service platform that is truly
transformational for the home furnishings industry. Our acquisition of
Outward, Inc., announced today, will enhance and extend this platform
and enable us to create highly engaging and interactive shopping
experiences that set a new industry standard.”

Comparable brand revenue in Q3 17 grew 3.3% compared to a decline
of 0.4% in Q3 16 as shown in the table below:

3rd Quarter Comparable Brand Revenue
Growth by Concept*

Q3 17

Q3 16

Pottery Barn

(0.3

%)

(4.6

%)

Williams Sonoma

2.3

%

0.1

%

West Elm

11.5

%

12.0

%

Pottery Barn Kids

0.1

%

(1.0

%)

PBteen

3.0

%

(10.9

%)

Total

3.3

%

(0.4

%)

* See the Company's 10-K and 10-Q filings for the definition of
comparable brand revenue

E-commerce net revenues in Q3 17 increased 6.4% to $690 million
from $649 million in Q3 16. E-commerce net revenues generated 53.1% of
total company net revenues in Q3 17 and 52.1% of total company net
revenues in Q3 16.

Retail net revenues in Q3 17 increased 2.1% to $609 million from
$597 million in Q3 16.

Selling, general and administrative (“SG&A”) expenses were $356
million, or 27.4% of net revenues in Q3 17, versus $348 million,
or 28.0% of net revenues in Q3 16. Excluding severance-related
reorganization charges of approximately $1.2 million, non-GAAP
SG&A expenses were $347 million, or 27.9% of net revenues, in Q3
16.

The effective income tax rate in Q3 17 was 35.3% versus 36.6% in
Q3 16. The year-over-year tax rate improvement was primarily driven by
the overall mix and level of earnings, as well as the incremental
benefits we are seeing from improved profitability across our
international operations, which are taxed at a lower tax rate.

Merchandise inventories at the end of Q3 17 increased 10.6% to
$1.177 billion from $1.064 billion at the end of Q3 16. A large portion
of this inventory growth, however, was associated with inventory that is
in-transit and not yet received at our distribution centers. The biggest
drivers of inventory growth are associated with our higher growth
brands, particularly West Elm and Rejuvenation. Based on our estimates,
we believe that inventory growth will be relatively in-line with sales
growth by the end of the year.

STOCK REPURCHASE PROGRAM

During Q3 17, we repurchased approximately 1.3 million shares of common
stock at an average cost of $46.84 per share and a total cost of
approximately $61 million. As of October 29, 2017, there was
approximately $256 million remaining under our current stock repurchase
program.

FISCAL YEAR 2017 FINANCIAL GUIDANCE

4th Quarter 2017 Guidance Financial
Highlights

Total Net Revenues (millions)

$1,610 – $1,675

Comparable Brand Revenue Growth

2% – 6%

Diluted EPS

$1.49 – $1.64

Fiscal Year 2017 Financial Guidance

Total Net Revenues (millions)

$5,225 – $5,290

Comparable Brand Revenue Growth

2% – 4%

Non-GAAP Operating Margin*

9.0% – 9.2%

Non-GAAP Diluted EPS*

$3.45 – $3.60

Income Tax Rate

35.0% – 36.0%

Capital Spending (millions)

$200 – $220

Depreciation and Amortization (millions)

$185 – $195

* Excludes certain items affecting comparability. See Notes 1 and
2 in Exhibit 1. Including these items,GAAP operating margin
guidance would be 8.9% to 9.1%. See Exhibit 1 for a reconciliation
of GAAP tonon-GAAP EPS.

Store Opening and Closing Guidance by Retail Concept*

FY 2016 ACT

FY 2017 GUID

Total

New

Close

End

Williams Sonoma

234

4

(9)

229

Pottery Barn

201

8

(6)

203

West Elm

98

10

(2)

106

Pottery Barn Kids

89

-

(4)

85

Rejuvenation

7

1

-

8

Total

629

23

(21)

631

* Included in the FY 16 store count are 19 stores in Australia
and one store in the UK.

FY 17 guidance includes one additional UK store, and does not
reflect the temporary store closures due to the hurricanes.

This press release includes non-GAAP SG&A, operating income, operating
margin and diluted EPS. These non-GAAP financial measures exclude the
impact of severance-related charges in Q1 16, Q3 16 and Q1 17, a
one-time favorable tax adjustment associated with intercompany
transactions in Q4 16, and tax expense related to the adoption of new
accounting rules related to stock-based compensation in Q1 17. We have
reconciled these non-GAAP financial measures with the most directly
comparable GAAP financial measures in the text of this release and in
Exhibit 1. We believe that these non-GAAP financial measures provide
meaningful supplemental information for investors regarding the
performance of our business and facilitate a meaningful evaluation of
our actual results and Q4 17 and FY 17 guidance on a comparable basis
with prior periods. Our management uses these non-GAAP financial
measures in order to have comparable financial results to analyze
changes in our underlying business from quarter to quarter. These
non-GAAP measures should be considered as a supplement to, and not as a
substitute for, or superior to, financial measures calculated in
accordance with GAAP.

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements that involve
risks and uncertainties, as well as assumptions that, if they do not
fully materialize or are proven incorrect, could cause our results to
differ materially from those expressed or implied by such
forward-looking statements. Such forward-looking statements include
statements relating to: the progress on our strategic initiatives; our
growth drivers; our future financial guidance, including Q4 17 and FY 17
guidance; our stock repurchase program; and our proposed store openings
and closures.

The risks and uncertainties that could cause our results to differ
materially from those expressed or implied by such forward-looking
statements include: accounting adjustments as we close our books for Q3
17; continuing changes in general economic conditions, and the impact on
consumer confidence and consumer spending; new interpretations of or
changes to current accounting rules; our ability to anticipate consumer
preferences and buying trends; dependence on timely introduction and
customer acceptance of our merchandise; changes in consumer spending
based on weather, political, competitive and other conditions beyond our
control; delays in store openings; competition from companies with
concepts or products similar to ours; timely and effective sourcing of
merchandise from our foreign and domestic vendors and delivery of
merchandise through our supply chain to our stores and customers;
effective inventory management; our ability to manage customer returns;
successful catalog management, including timing, sizing and
merchandising; uncertainties in e-marketing, infrastructure and
regulation; multi-channel and multi-brand complexities; our ability to
introduce new brands and brand extensions; challenges associated with
our increasing global presence; dependence on external funding sources
for operating capital; disruptions in the financial markets; our ability
to control employment, occupancy and other operating costs; our ability
to improve our systems and processes; changes to our information
technology infrastructure; general political, economic and market
conditions and events, including war, conflict or acts of terrorism; the
impact of potential corporate tax reform; and other risks and
uncertainties described more fully in our public announcements, reports
to stockholders and other documents filed with or furnished to the SEC,
including our Annual Report on Form 10-K for the fiscal year ended
January 29, 2017, and all subsequent quarterly reports on Form 10-Q and
current reports on Form 8-K. All forward-looking statements in this
press release are based on information available to us as of the date
hereof, and we assume no obligation to update these forward-looking
statements.

ABOUT WILLIAMS-SONOMA, INC.

Williams-Sonoma, Inc. is a specialty retailer of high-quality products
for the home. These products, representing eight distinct merchandise
strategies – Williams Sonoma, Pottery Barn, Pottery Barn Kids, West Elm,
PBteen, Williams Sonoma Home, Rejuvenation, and Mark and Graham – are
marketed through e-commerce websites, direct mail catalogs and retail
stores. Williams-Sonoma, Inc. currently operates in the United States,
Canada, Australia and the United Kingdom, offers international shipping
to customers worldwide, and has unaffiliated franchisees that operate
stores in the Middle East, the Philippines and South Korea, and stores
and e-commerce websites in Mexico.

Williams-Sonoma, Inc.

Condensed Consolidated Statements of Earnings (unaudited)

Thirteen weeks ended October 29, 2017 and October 30, 2016

(Dollars and shares in thousands, except per share amounts)

3rd Quarter

2017

2016

$

% ofRevenues

$

% ofRevenues

E-commerce net revenues

$

690,045

53.1

%

$

648,743

52.1

%

Retail net revenues

609,291

46.9

%

596,642

47.9

%

Net revenues

1,299,336

100.0

%

1,245,385

100.0

%

Cost of goods sold

832,269

64.1

%

787,162

63.2

%

Gross profit

467,067

35.9

%

458,223

36.8

%

Selling, general and administrative expenses

356,254

27.4

%

348,244

28.0

%

Operating income

110,813

8.5

%

109,979

8.8

%

Interest expense, net

594

-

488

-

Earnings before income taxes

110,219

8.5

%

109,491

8.8

%

Income taxes

38,906

3.0

%

40,113

3.2

%

Net earnings

$

71,313

5.5

%

$

69,378

5.6

%

Earnings per share (EPS):

Basic

$0.84

$0.78

Diluted

$0.84

$0.78

Shares used in calculation of EPS:

Basic

84,940

88,382

Diluted

85,384

89,144

Williams-Sonoma, Inc.

Condensed Consolidated Statements of Earnings (unaudited)

Thirty-nine weeks ended October 29, 2017 and October 30, 2016

Year-to-Date

2017

2016

$

% ofRevenues

$

% ofRevenues

E-commerce net revenues

$

1,901,348

52.6

%

$

1,824,660

52.1

%

Retail net revenues

1,711,101

47.4

%

1,677,571

47.9

%

Net revenues

3,612,449

100.0

%

3,502,231

100.0

%

Cost of goods sold

2,326,911

64.4

%

2,240,952

64.0

%

Gross profit

1,285,538

35.6

%

1,261,279

36.0

%

Selling, general and administrative expenses

1,030,667

28.5

%

1,004,499

28.7

%

Operating income

254,871

7.1

%

256,780

7.3

%

Interest expense, net

974

-

587

-

Earnings before income taxes

253,897

7.0

%

256,193

7.3

%

Income taxes

90,112

2.5

%

95,433

2.7

%

Net earnings

$

163,785

4.5

%

$

160,760

4.6

%

Earnings per share (EPS):

Basic

$1.90

$1.81

Diluted

$1.89

$1.79

Shares used in calculation of EPS:

Basic

86,111

88,906

Diluted

86,582

89,764

Williams-Sonoma, Inc.

Condensed Consolidated Balance Sheets (unaudited)

(Dollars and shares in thousands, except per share amounts)

Oct. 29, 2017

Jan. 29, 2017

Oct. 30, 2016

Assets

Current assets

Cash and cash equivalents

$

90,779

$

213,713

$

75,381

Accounts receivable, net

92,282

88,803

96,386

Merchandise inventories, net

1,176,941

977,505

1,063,747

Prepaid catalog expenses

22,992

23,625

25,329

Prepaid expenses

65,326

52,882

74,195

Other assets

12,141

10,652

12,176

Total current assets

1,460,461

1,367,180

1,347,214

Property and equipment, net

931,131

923,283

918,020

Deferred income taxes, net

131,793

135,238

136,558

Other assets, net

56,999

51,178

51,540

Total assets

$

2,580,384

$

2,476,879

$

2,453,332

Liabilities and stockholders' equity

Current liabilities

Accounts payable

$

470,783

$

453,710

$

450,144

Accrued salaries, benefits and other liabilities

103,349

130,187

111,445

Customer deposits

288,569

294,276

289,737

Borrowings under revolving line of credit

170,000

-

125,000

Income taxes payable

48,865

23,245

1,122

Other liabilities

55,985

59,838

53,423

Total current liabilities

1,137,551

961,256

1,030,871

Deferred rent and lease incentives

195,220

196,188

192,948

Other long-term obligations

75,439

71,215

70,031

Total liabilities

1,408,210

1,228,659

1,293,850

Stockholders’ equity

Preferred stock: $.01 par value; 7,500 shares authorized;

none issued

-

-

-

Common stock: $.01 par value; 253,125 shares authorized;

84,478, 87,325 and 88,014 shares issued and outstanding

at October 29, 2017, January 29, 2017 and October 30, 2016,

845

873

881

respectively

Additional paid-in capital

557,198

556,928

547,513

Retained earnings

623,170

701,702

623,243

Accumulated other comprehensive loss

(8,314

)

(9,903

)

(10,772

)

Treasury stock, at cost

(725

)

(1,380

)

(1,383

)

Total stockholders’ equity

1,172,174

1,248,220

1,159,482

Total liabilities and stockholders' equity

$

2,580,384

$

2,476,879

$

2,453,332

Williams-Sonoma, Inc.

Condensed Consolidated Statements of Cash Flows (unaudited)

Thirty-nine weeks ended October 29, 2017 and October 30, 2016

(Dollars in thousands)

Year-to-Date

2017

2016

Cash flows from operating activities

Net earnings

$

163,785

$

160,760

Adjustments to reconcile net earnings to net cash

provided by (used in) operating activities:

Depreciation and amortization

135,473

127,745

Loss on disposal/impairment of assets

1,299

1,852

Amortization of deferred lease incentives

(18,987

)

(18,789

)

Deferred income taxes

(11,884

)

(14,461

)

Tax benefit related to stock-based awards

15,439

23,571

Excess tax benefit related to stock-based awards

-

(4,817

)

Stock-based compensation expense

30,164

37,975

Other

(416

)

(647

)

Changes in:

Accounts receivable

(2,341

)

(17,400

)

Merchandise inventories

(197,757

)

(82,410

)

Prepaid catalog expenses

633

3,591

Prepaid expenses and other assets

(20,001

)

(29,205

)

Accounts payable

7,544

(17,403

)

Accrued salaries, benefits and other liabilities

(26,883

)

(507

)

Customer deposits

(5,815

)

(7,445

)

Deferred rent and lease incentives

17,000

25,969

Income taxes payable

25,677

(65,915

)

Net cash provided by operating activities

112,930

122,464

Cash flows from investing activities:

Purchases of property and equipment

(135,821

)

(127,169

)

Other

458

370

Net cash used in investing activities

(135,363

)

(126,799

)

Cash flows from financing activities:

Borrowings under revolving line of credit

170,000

125,000

Repurchases of common stock

(154,321

)

(115,167

)

Payment of dividends

(101,928

)

(100,854

)

Tax witholdings related to stock-based awards

(14,836

)

(26,518

)

Excess tax benefit related to stock-based awards

-

4,817

Proceeds related to stock-based awards

-

1,532

Other

(20

)

(48

)

Net cash used in financing activities

(101,105

)

(111,238

)

Effect of exchange rates on cash and cash equivalents

604

(2,693

)

Net decrease in cash and cash equivalents

(122,934

)

(118,266

)

Cash and cash equivalents at beginning of period

213,713

193,647

Cash and cash equivalents at end of period

$

90,779

$

75,381

Exhibit 1

(Unaudited)

Reconciliation of 3rd Quarter GAAP to
Non-GAAP Operating Income and Operating Margin By Segment*

($ in thousands)

E-commerce

Retail

Unallocated

Total

Q3 17

Q3 16

Q3 17

Q3 16

Q3 17

Q3 16

Q3 17

Q3 16

Net Revenues

$690,045

$648,743

$609,291

$596,642

$

-

$

-

$1,299,336

$1,245,385

GAAP Operating Income/(Expense)

142,865

150,164

42,804

47,080

(74,856)

(87,265)

110,813

109,979

GAAP Operating Margin

20.7%

23.1%

7.0%

7.9%

(5.8%)

(7.0%)

8.5%

8.8%

Severance-related Charges(1)

-

-

-

-

-

1,185

-

1,185

Non-GAAP Operating Income/ (Expense) (5)

$142,865

$150,164

$42,804

$47,080

$(74,856)

$(86,080)

$110,813

$111,164

Non-GAAP Operating Margin(5)

20.7%

23.1%

7.0%

7.9%

(5.8%)

(6.9%)

8.5%

8.9%

* See the Company’s 10-K and 10-Q filings for additional
information on segment reporting and the definition of Operating
Income/(Expense) and Operating Margin.

Reconciliation of Quarterly and Fiscal Year GAAP to Non-GAAP

Diluted Earnings Per Share**

(Totals rounded to the nearest cent per diluted share)

Q1 17

Q2 17

Q3 17

Q4 17

FY 17

ACT

ACT

ACT

GUID

GUID

2017 GAAP Diluted EPS

$0.45

$0.61

$0.84

$1.49 - $1.64

$3.39 - $3.54

Impact of Severance-related Charges(2)

$0.04

-

-

-

$0.04

Unfavorable Tax Impact from the Adoption of New Accounting Rules (3)

$0.02

-

-

-

$0.02

2017 Non-GAAP Diluted EPS (5)

$0.51

$0.61

$0.84

$1.49 - $1.64

$3.45 - $3.60

Q1 16

Q2 16

Q3 16

Q4 16

FY 16

ACT

ACT

ACT

ACT

ACT

2016 GAAP Diluted EPS

$0.44

$0.58

$0.78

$1.63

$3.41

Impact of Severance-related Charges(1)

$0.09

-

$0.01

-

$0.10

One-time Favorable Tax Adjustment(4)

-

-

-

($0.08)

($0.08)

2016 Non-GAAP Diluted EPS (5)

$0.53

$0.58

$0.79

$1.55

$3.43

** Due to the differences between the quarterly and year-to-date
weighted average share count calculations and rounding to the
nearest cent per diluted share, totals

may not equal the sum of the line items and fiscal year diluted EPS
may not equal the sum of the quarters.

Store Statistics

Avg. Leased Square Footage

Store Count

Per Store

Jul. 30, 2017

Openings

Closings***

Oct. 29, 2017

Oct. 30, 2016

Oct. 29, 2017

Oct. 30, 2016

Williams Sonoma

234

1

(2)

233

241

6,700

6,600

Pottery Barn

204

1

(3)

202

202

13,900

13,800

West Elm

101

5

(1)

105

97

13,100

13,300

Pottery Barn Kids

88

-

-

88

89

7,400

7,500

Rejuvenation

8

-

-

8

6

8,800

9,300

Total

635

7

(6)

636

635

10,200

10,000

Jul. 30, 2017

Oct. 29, 2017

Oct. 30, 2016

Total store selling square footage

3,998,000

4,031,000

3,966,000

Total store leased square footage

6,428,000

6,468,000

6,381,000

***

Q3 17 closings include two Williams Sonoma, two Pottery Barn and
one West Elm temporary closures in Puerto Rico and Florida due to
hurricanes in these areas. These stores are expected to reopen in
Q4 17.

Notes:

(1)

During Q1 16 and Q3 16 we incurred severance-related reorganization
charges due to headcount reduction primarily in our corporate
functions totaling approximately $13 million, or $0.09 per diluted
share, and $1 million, or $0.01 per diluted share, respectively.
These charges were recorded as SG&A expense within the unallocated
segment.

(2)

During Q1 17 we incurred severance-related charges associated with
the previously announced departure of the former President of the
Pottery Barn brands, as well as other severance-related charges, of
approximately $6 million, or $0.04 per diluted share. These charges
were recorded as SG&A expense within the unallocated segment.

(3)

During Q1 17 we incurred tax expense of approximately $1 million, or
$0.02 per diluted share, associated with the adoption of new
accounting rules related to stock-based compensation.

(4)

During Q4 16 we incurred a benefit of approximately $8 million, or
$0.08 per diluted share, related to a one-time tax adjustment
associated with intercompany transactions.

(5)

SEC Regulation G – Non-GAAP Information – These tables include
non-GAAP operating income, operating margin and diluted EPS. We
believe that these non-GAAP financial measures provide meaningful
supplemental information for investors regarding the performance of
our business and facilitate a meaningful evaluation of our actual
results and Q4 17 and FY 17 guidance on a comparable basis with
prior periods. Our management uses these non-GAAP financial measures
in order to have comparable financial results to analyze changes in
our underlying business from quarter to quarter. These non-GAAP
financial measures should be considered as a supplement to, and not
as a substitute for, or superior to, financial measures calculated
in accordance with GAAP.

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